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What Is Price Perception?

Geri Terzo
Geri Terzo

Price perception is a marketing strategy used by businesses to increase total sales. Although the practice does not necessarily misrepresent the products being sold, it is often considered a covert, or slightly undercover, approach. The success of this strategy is dependent on consumer psychology because the message must convince customers that expensive items are not that far away in price from less costly products. Ultimately, it is up to customers to decide whether or not products warrant their investment.

A business can sometimes benefit from downplaying the value of high-end products instead of treating expensive items as though they are special. This type of psychology could work because of price perception, which is the way that consumers interpret the cost for items despite the price tag that might be attached to the products. Positioning pricey products in the same area as less expensive inventory could alter a consumer's price perception so that there appears to be less of a discrepancy between high-end and low-end items.

Price perception is a marketing strategy used by businesses to increase total sales.
Price perception is a marketing strategy used by businesses to increase total sales.

When a costly product is marketed to fulfill a similar purpose as less expensive items, it may be more acceptable to consumers. Without even knowing it, customers might equate costly items with their less expensive counterparts simply because of the way the items are marketed and placed in a retail outlet. Subsequently, consumers might be more inclined to pay more for an item simply as a result of price perception. As long as customers understand a price to be acceptable, even if it is a result of strategic marketing efforts by a retailer or manufacturer, they may be convinced to make a higher-priced purchase that would otherwise be ignored.

Price perception could work against an organization if a customer feels deceived. For instance, bait and switch is another marketing tactic that businesses can use when performed ethically. It is the practice of advertising an inexpensive item but later attempting to sell inquiring customers a higher-priced item. Retailers can bolster sales by using the customer's inquiry as an opportunity to switch the cheaper item for a more expensive product. Savvy consumers might not fall for this strategy and price perception could be a less convincing tactic when customers have already decided to pay a certain amount for an item.

Businesses who are not seeking to capitalize on price perception would focus instead on providing consumers with transparency. This is a marketing approach that attempts to provide as much information and context about a purchase as possible, including the potential risks associated with an item. Subsequently, consumers are less likely to make selections they may later regret.

Discussion Comments


@Logicfest -- The way cell phones are priced has certainly worked in Apple's favor. What people don't consider is that the $200 paid for an iPhone on a contract is only a down payment -- the rest of the cost of the phone is financed over the life of the contract. If an iPhone costs $800, the consumer doesn't realize it because the real price of the phone is divided up into small, monthly payments.

I'm not sure if that's called price perception, but it seems to come close to the concept.


Apple has made a fortune using this strategy. Consider how Apple computers were marketed against how iPhones and iPads are not marketed. Apple computers -- and especially Macs -- were considered to be priced at a premium. That image worked against the company.

On the other hands, iPhones are viewed as being roughly in the same neighborhood in terms of price as competing Android devices. Throw in a brilliant pricing scheme first introduced with AT&T and you've got a product that is viewed as superior to items that are close in price. That pricing scheme is easy enough -- come into AT&T, Verizon or another company, plunk down $200 and walk out with an iPhone instead of something else.

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    • Price perception is a marketing strategy used by businesses to increase total sales.
      By: jura
      Price perception is a marketing strategy used by businesses to increase total sales.